Final Results
Crest Nicholson PLC
26 January 2005
26th January 2005
CREST NICHOLSON PLC
Preliminary Results Announcement
Crest Nicholson PLC, the residential and mixed use development company, today
announces results for the year ended 31st October 2004.
Financial highlights: % increase
• Turnover from continuing operations increased to £643.2m (2003: £550.5m) +17%
• Profit before taxation increased to £82.1m (2003: £74.6m) +10%
• Earnings per share increased to 49.4p (2003: 45.2p) + 9%
• Proposed final dividend of 8.3p, making a total for the year of 12.3p(2003: 11.0p) +12%
• Compound earnings per share growth 2000-2004 +17%
• Net assets attributable to ordinary shares equivalent to 260p (2003:224p) +16%
• Short term housing land bank 15,060 units (2003:13,204) - over 5 years supply +14%
• Strategic land bank maintained at c.13,000 plots
Operational highlights:
• Total housing units up 30% to 2,524 houses sold (2003: 1,936)
• Affordable housing units up 131% to 712 units (2003: 308)
• Housing turnover up 14% to £529.9m (2003: £463.3m)
• As anticipated, average selling price of £210,000 (2003: £239,000)
reflecting increased volume of affordable housing
• Land sales £44.7m (2003: £74.0m)
• Strong commercial sales on mixed use projects of £68.6m (2003: £13.2m)
• Development portfolio sales value up 12% to £3.31bn (2003: £2.96bn) with
a further £1bn agreed pipeline of major urban regeneration projects at
Oakgrove in Milton Keynes, Bath Western Riverside and Camberley
Commenting today John Callcutt, Chief Executive, said:
"These results begin to show the success of our focus on sustainable and mixed
use development. We have established our track record in the master planning and
delivery of large scale residential and mixed use developments and we lead the
market in our grasp of sustainability issues. We now look forward with
confidence to making further inroads into the huge urban regeneration market and
thereby serving both shareholder and community interests."
Enquiries to:
Crest Nicholson PLC Brunswick Group LLP
John Callcutt, Chief Executive Andrew Fenwick
Stephen Stone, Chief Operating Officer Kate Miller
Peter Darby, Finance Director Robert Gardener
Tel: 020 7404 5959 (on day of announcement) Tel: 020 7404 5959
Tel: 01932 847272 (thereafter)
The analyst presentation will be available on the Company's web site
www.crestnicholson.com from 9.30am
CHAIRMAN'S STATEMENT
Results
I am delighted to report another year of record results and strong progress in
delivering Crest Nicholson's urban regeneration strategy.
Pre-tax profits rose by 10% to £82.1m and our earnings per share increased by 9%
to 49.4p.
Dividend
We are recommending a final dividend of 8.3p per share. This will give a total
for the year of 12.3p, up 12%. The dividend will be covered 4.0 times. The final
dividend will be paid on 11th April 2005 to shareholders on the register at 11th
March 2005.
Strategy
Crest's strategy is to be the market leader in the design and delivery of
sustainable housing and mixed use development. We have made considerable
progress with this strategy in 2004, the highlights of which have been the
increase in affordable housing, the establishment of a new eastern region and
the expansion in our urban regeneration work.
With regard to urban regeneration, the success of our mixed use developments
such as Bristol Harbourside and Park Central, Birmingham and of Ingress Park,
our flagship Thames Gateway development, has generated the momentum for Crest to
make further inroads in this important growth market. In September, we announced
that we had been appointed as lead developer for the £500m development of the
Oakgrove Millennium Community, the very first millennium community project to be
awarded. In October, we announced a partnership agreement with Grosvenor for the
£1 billion regeneration of Bath Western Riverside. In November, we announced
that we had entered into a contract with Surrey Heath Borough Council for the
£100m redevelopment of a major site in Camberley town centre.
Prospects
Crest Nicholson is well placed to play a major role in delivering new
sustainable communities and the supply of the affordable homes that are so
clearly needed in all our areas of operation. Our market positioning offers our
shareholders excellent prospects for future growth and increased value.
OPERATING AND FINANCIAL REVIEW
Market Positioning
Urban regeneration is a huge market and one in which Crest now has the
reputation, track record, and skills to secure exciting opportunities which will
deliver both sustainable communities and increasing shareholder returns.
Crest has moved decisively in recent years to position itself as a market leader
in sustainable development and the urban regeneration partner of choice for the
public and private sectors. We apply our planning and management skills to
create mixed use and mixed tenure developments in which current and future
generations will want to live and work.
We have put innovative design, product quality and social awareness at the heart
of our product offering and we have embraced the economic and social imperative
of producing more affordable housing, particularly in the South East, with the
result that we have more than doubled our production of affordable homes in
2004.
Trading Performance
2004 was a record year for Crest with pre-tax profits up 10% to a new high of
£82.1m (2003: £74.6m).
Housing
We increased the number of housing units sold by 30% to 2,524 (2003: 1,936).
Open market units were up 11% at 1,812 (2003: 1,628) which was a solid
performance while the number of affordable units more than doubled to 712 units
(2003: 308). While, in 2006 and beyond, the number of affordable units is set to
grow, fewer affordable units will be delivered in 2005 due to the lumpy nature
of the affordable programme.
As previously announced, the average selling price fell to £210,000 as a result
of the doubling of affordable unit volumes. The average selling price of open
market housing units was 5% lower at £244,000 (2003: £258,000) due to both
increased volumes from our South West and Midlands businesses and our planned
move to the broader mid market sector. In 2005, the average selling price will
rise due to the temporary lull in affordable unit numbers noted above.
Our housing forward sales position at the year end was 4% up at £201m (2003:
£193m). Our current forward sales position is £265m (2003: £275m). This is
slightly down due to the large number of reservations taken on the successful
launch of Bristol Harbourside in the prior year.
Land Sales
As part of our strategy we assemble large sites and create substantial land
value as we bring them through the planning process and into development.
Crest's strength in land buying and planning enables us to secure a dependable
flow of planning permissions on significantly more land than we are able to
develop. Sale of land is, and will continue to be, an integral part of Crest's
method of operation not only to generate cash but also to allow us to adjust our
portfolio to changing market conditions.
Housing land sales amounted to £45m, compared with £74m in 2003. The 2003
comparative included the sale of sites in the South East which would have
increased our exposure to the upper market sector.
Mixed Use Commercial
Commercial property sales amounted to £69m, compared with £13m last year. The
increase reflects the flow of sales from the major mixed use schemes at Bristol
Harbourside, Park Central, Birmingham and Riverside, Hemel Hempstead.
Our commercial forward sales position at the year end amounted to £109m (2003:
£116m).
Operating Margins
The planned increase in affordable units and commercial sales, which have
inherently lower risks and margins than open market housing, led, as expected,
to a reduction in the overall group gross margin from 24.5% to 22.4%. This was
offset by a significant improvement in overhead efficiency to 7.6% (2003: 8.6%)
attributable to turnover gains and tight overhead control. Overall operating
margins were therefore 14.8% (2003: 15.9%).
Housing and Commercial Portfolios
In 2004, we acquired 44 sites comprising 4,661 plots, with a projected
development value of £883m.
The short term housing portfolio now stands at 15,060 plots (2003: 13,204 plots)
with a projected development value of £2.89bn (2003: £2.48bn), an increase of
16% over the twelve months. At the current level of turnover, the portfolio
represents over 5 years' supply.
Our housing strategic land bank consists of 800 acres controlling 13,182 plots
(2003: 13,236). Our aim is to substantially replace greenfield sites with urban
development opportunities. Consequently, we expect the greenfield strategic land
bank to reduce both in size and in proportion as it is consented and to be
replaced with urban regeneration land.
The current commercial land portfolio covers over 100 acres for 1.8 million
square feet of commercial space with a development value of £418m. The majority
of this relates to the mixed use schemes at Bristol Harbourside, Riverside in
Hemel Hempstead, Park Central in Birmingham, Farnham and Chertsey North. In
addition we have 240 acres of strategic commercial land.
These housing and commercial statistics exclude the projects at Oakgrove in
Milton Keynes, at Bath Western Riverside and in Camberley town centre which were
agreed but not contracted at year end.
Financial Position
Shareholders' funds increased by £42.6m or 15% to £328.4m. The net assets
attributable to the ordinary shares are equivalent to 260p per share compared to
224p per share at October 2003, an increase of 16%.
The Group's capital employed of £506.8m has increased by £139.1m and the return
on average capital employed is 21.7% compared to 23.4% last year. The increase
in capital employed is due principally to a number of apartment blocks reaching
build completion in the final quarter for which receipts are due in the first
quarter of 2005.
The Group has a £225m five year Revolving Credit Facility from a syndicate of
nine banks. This together with the £120m US Private Placement and overdraft
facilities, means the Group has total borrowing facilities available of £352m.
Net borrowings at the year end were £178.4m (2003: £81.9m), representing gearing
of 54% (2003: 29%) which is in line with our normal gearing policy. Average
borrowings of £184.4m were similar to 2003 (£182.9m).
Net interest costs at £12.8m were at a similar level to 2003 but interest cover
has improved to 7.4x, compared with 6.9x in 2003.
Market Outlook
In the second half of 2004 customers became more cautious following a succession
of interest rate rises and the rate of house price inflation has abated.
However, the fundamentals of the market remain good: demand is supported by
continued growth in the UK economy and by low unemployment. Supply in the
southern half of England, where we operate, is constrained by inflexibilities in
the planning system and intervention by the public sector. We believe this
shortage will help underpin prices in the coming year.
While we expect to be operating in a less buoyant housing market, the quality of
the housing land bank and the strength of our affordable and mixed use
commercial businesses give us confidence that we can make further progress in
2005. Our emphasis on sustainable development in the context of urban
regeneration leaves us particularly well placed for the longer term.
STATEMENT OF RESULTS
for the year ended 31st October 2004
2004 2003
£m £m £m £m
Turnover - including joint ventures (Note 1) 643.2 574.4
Less: attributable to joint ventures (12.0) (12.0)
------ ------
Group turnover - continuing operations 631.2 538.5
Group turnover - discontinued operations - 631.2 23.9 562.4
------ ------
Cost of sales (489.3) (423.7)
------ ------
Gross profit 141.9 138.7
Operating costs (49.0) (50.8)
------ ------
Group operating profit - continuing 92.9 87.9
Operating profit/(loss) of joint ventures -
continuing 2.0 (0.6)
------ ------
Operating profit - including joint
ventures (Note 1) 94.9 87.3
Net interest payable (12.8) (12.7)
------ ------
Profit before taxation (Note 1) 82.1 74.6
Taxation (25.1) (23.0)
------ ------
Profit for the financial year 57.0 51.6
Preference dividends (2.1) (2.1)
------ ------
Profit attributable to ordinary 54.9 49.5
shareholders
Ordinary dividends (13.7) (12.2)
------ ------
Retained profit 41.2 37.3
====== ======
Earnings per share (Note 2)
Basic 49.4p 45.2p
Diluted 49.0p 44.7p
Dividends per share 12.3p 11.0p
CONSOLIDATED BALANCE SHEET
At 31st October 2004
2004 2003 Restated
£m £m £m £m
Fixed assets
Tangible assets 2.5 2.1
Investments in joint ventures 21.2 15.6
-------- -------
23.7 17.7
Current assets
Stocks 771.9 651.6
Debtors 239.4 125.9
Cash at bank and in hand 10.9 55.2
-------- -------
1,022.2 832.7
Creditors: amounts falling due
within one year (304.4) (300.6)
-------- -------
Net current assets 717.8 532.1
-------- -------
Total assets less current liabilities 741.5 549.8
Creditors: amounts falling due
after more than one year (411.4) (262.9)
Provisions for liabilities and charges (1.7) (1.1)
-------- -------
(413.1) (264.0)
-------- -------
328.4 285.8
======== =======
Shareholders' funds (Note 3) 328.4 285.8
======== =======
Net borrowings 178.4 81.9
Gearing 54% 29%
Net assets per ordinary share (Note 4) 260p 224p
Consolidated Cash Flow Statement
For the year ended 31st October 2004
2004 2003
£m £m £m £m
Net cash (outflow)/inflow from operating
activities (41.6) 88.7
Dividend received from joint venture 1.4 -
Returns on investments and servicing of
finance
Interest received 0.4 0.3
Interest paid (12.8) (13.2)
Preference dividends paid (2.1) (2.1)
------ ------
Net cash outflow from returns on
investments (14.5) (15.0)
and servicing of finance
Taxation
Corporation tax paid (24.9) (15.8)
Capital expenditure and financial
investment
Tangible fixed assets acquired (1.3) (0.8)
Tangible fixed assets disposed - 0.3
Acquisition of own shares for ESOP Trust (0.4) -
Other fixed asset investment loan advances (8.8) (8.7)
Other fixed asset investment loan 3.1 3.3
repayments ------ ------
Net cash outflow from capital expenditure
and financial investment (7.4) (5.9)
Acquisitions and disposals
Disposal of subsidiary companies 2.3 7.7
Equity dividends paid (12.8) (10.9)
------ ------
Net cash (outflow)/inflow before financing (97.5) 48.8
Financing
Proceeds from equity share issues 1.0 1.1
Increase/(decrease) in bank loan and loan 51.0 (15.0)
notes ------ ------
Net cash inflow/(outflow) from financing 52.0 (13.9)
------ ------
(Decrease)/increase in cash in year (45.5) 34.9
====== ======
NOTES
1 Segmental Analysis Operating Pre-tax Capital
Turnover profit profit employed
£m £m £m £m
2004
Development 643.2 94.9 82.1 506.8
========= ========= ========= =========
2003 Restated
Development 550.5 87.3 74.6 367.7
Construction - discontinued 23.9 - - -
--------- --------- --------- ---------
574.4 87.3 74.6 367.7
========= ========= ========= =========
2 Earnings per share
Earnings per share are calculated on the profit attributable to ordinary
shareholders of £54.9m (2003: £49.5m), on a weighted average of 111,043,698
(2003: 109,505,528) ordinary shares in issue during the year.
Diluted earnings per share are calculated on the profit attributable to ordinary
shareholders of £54.9m (2003: £49.5m), on a weighted average of 112,042,818
(2003: 110,641,033) ordinary shares on the basis that 2,555,643 (2003:
3,156,724) share options had been exercised.
3 Reconciliation of shareholders' funds
2004 2003
Restated
£m £m
Retained profit 41.2 37.3
Net proceeds from share issues 1.0 1.1
Employee Share Ownership Trust movements 0.4 0.3
-------- --------
Net increase in shareholders' funds 42.6 38.7
Opening shareholders' funds 285.8 247.1
-------- --------
Closing shareholders' funds 328.4 285.8
======== ========
Shareholders' funds for 2003 have been restated by £0.3m to comply with UITF38 -
Accounting for ESOP Trusts.
4 Net assets per share
Net assets per ordinary share is calculated on net assets of £290.4m (2003:
£247.8m), after deducting the preference capital of £38.0m (2003: £38.0m) from
the capital and reserves, on 111,395,562 (2003: 110,417,298) ordinary shares in
issue and ranking for full dividends at 31st October 2004.
5 Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st October 2004 or 2003 but is derived
from those accounts. Statutory accounts for 2003 have been delivered to the
Registrar of Companies, whereas those for 2004 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain a statement under Section 237
(2) or (4) of the Companies Act 1985.
6 Annual General Meeting
The Annual General Meeting will be held at the Runnymede Hotel, Windsor Road,
Egham, Surrey on Friday, 8th April at 12.00 noon.
FIVE YEAR RECORD
2000 2001 2002 2003 2004
Turnover (including joint ventures) £m £m £m £m £m
-------------------------------------
Development 411.4 392.9 515.5 550.5 643.2
Construction -
discontinued 133.1 193.2 180.9 23.9 -
-------- -------- -------- -------- --------
544.5 586.1 696.4 574.4 643.2
-------- -------- -------- -------- --------
---
Operating profit (including joint ventures) £m £m £m £m £m
--------------------------------------------
Development 52.2 59.6 79.2 87.3 94.9
Construction -
discontinued 0.9 1.2 (3.4) - -
-------- -------- -------- -------- --------
53.1 60.8 75.8 87.3 94.9
-------- -------- -------- -------- --------
Operating margin -
development 12.7% 15.2% 15.4% 15.9% 14.8%
Pre-tax profit £m £m £m £m £m
----------------
Development 41.9 49.3 66.3 74.6 82.1
Construction -
discontinued 0.8 1.2 (3.3) - -
-------- -------- -------- -------- --------
42.7 50.5 63.0 74.6 82.1
-------- -------- -------- -------- --------
---
Housing
---------
Houses sold 1,717 1,543 1,899 1,936 2,524
Average selling price £162,500 £186,700 £225,100 £239,300 £210,000
Land bank - Short term
(units) 7,778 10,424 10,760 13,204 15,060
Average selling price £185,700 £185,800 £197,600 £187,900 £192,200
Land bank - Strategic
(units) 12,562 11,862 13,735 13,236 13,182
---
Balance sheet £m £m £m £m £m
---------------
Shareholders' funds 188.3 214.0 247.1 285.8 328.4
Net borrowings 79.7 102.5 131.8 81.9 178.4
-------- -------- -------- -------- --------
Capital employed 268.0 316.5 378.9 367.7 506.8
-------- -------- -------- -------- --------
Gearing 42% 48% 53% 29% 54%
Return on shareholders'
funds (average) 24.0% 25.1% 27.3% 28.0% 26.7%
Return on capital
employed (average) 20.8% 20.8% 21.8% 23.4% 21.7%
---
Ordinary shares
-----------------
Earnings per share 26.4p 30.8p 38.8p 45.2p 49.4p
Dividends per share 7.00p 8.00p 9.50p 11.0p 12.3p
Dividend cover 3.8x 3.8x 4.1x 4.1x 4.0x
Net tangible assets per
share 141p 164p 192p 224p 260p
Note: The figures for the years 2000 and 2001 have been restated to reflect the
change in income recognition policy in 2002. The figures for 2003 have been
restated for the effect of UITF38 - Accounting for ESOP Trusts.
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